Offer in Compromise or Uncollectible

Offer in Compromise (OIC) is the best thing since sliced bread. You owe $100,000 in tax debt to IRS. You make an offer for the debt settlement of $1,000 or even less and they accept it. How good is that?

Does it happen all the time? Not by far. Most offer in compromise applications are rejected. Who wins and who loses is what we want to talk about?

In any IRS negotiations, the outcome must be one of three, either an installment agreement, uncollectible status, currently not collectible (CNC) as the IRS calls it or an offer in compromise. In my opinion offer in compromise is superior to all when a taxpayer has the ability to choose either the OIC or the CNC.

Although, unlike the offer in compromise, uncollectible status requires you to pay zero, I still contend that the offer in compromise is superior to the non collectible status.

We frequently choose to seek an offer in compromise for our clients rather than the non collectible status, even when both are available to the client. Why would any one in his right mind choose to pay money for an offer in compromise when he or she could get away with zero? 

There are two main important reasons for that. The first is the penalty and interest. The second is that the uncollectible status can be an apparition which may be resurrected to torment you in the future. The key thing to understand about the currently not collectible is the word currently. It means although we, the IRS, cannot collect form you now, we have not forgot that you owe us money. 

The minute the IRS sees that you have a raise or some money is coming your way, they will summon the spooky ghost to knock on your door and demand everything; all prior taxes that you owed and then some. And then some? Yes and then some.  The IRS wants you to pay the tax debt, all the tax debt and the interest and the penalty thereon. My friends, the IRS computer has been ticking all along when they declared you CNC. They did not attack you but their computer is preparing for a day of reckoning.

Now, let me ask you a simple question: you have a tax problem of $100,000 and you have the option of paying $1,000 in an offer in compromise that will put the tax debt to rest once and for all. $1,000 will erase your name from among those who have an IRS problem for eternity. On the other hand, you can pay zero now as uncollectible but have Big Brother watching you for years to come, waiting to take your wallet. Big Brother smells the scent of money and he's coming your way, again. Need I tell how to cast your vote? Ok, take the offer in compromise, my friends and then dissolve your tax problems in the ether.